The Conservative party manifesto says that finance will continue to be a world leading sector after Brexit is complete. What have the Conservatives pledged in terms of funding and tax? How have businesses benefitted from a Tory win?
The election results have had a knock-on effect on businesses. The reactions to the 2019 general election results were instant - the currency took a short-lived jump up 2.7% and businesses became richer overnight.
As a result of the election, foreign investors seem to have more hope and confidence in UK businesses and the economy becoming stable, after three years of uncertainty since the Brexit vote.
However, this is not necessarily the end of economic uncertainty. Although Brexit will be complete when the bill is passed in January, trade deal negotiations are expected to continue until the end of 2020. The UK’s long-term relationship with the EU is a concern which will need to be carefully managed over the course of this process.
Immediately after the election, shares shot up in many companies, including Wetherspoons, Stagecoach, and travel company Go-Ahead. Wetherspoons’ share price increased 10% overnight, making its founder and 32% stakeholder, Tim Martin, £44m richer on paper. Shares in banks and housebuilders also rose.
Fiscal policy will support the steady growth prospects predicted to continue for businesses in 2020. The government pledges for spending were revealed before the vote. Will the Conservatives be able to deliver? Here is what is on offer…
Government spending pledges
Overall, the Conservative party plans to spend £78 billion extra throughout the next five years, for sectors such as health and social care, education, environment, infrastructure and other expenses.
The three highest government spending pledges are on local roads, healthcare and education - these numbers show the priorities of the party in power.
Local roads – £28.8bn: The largest spend of all will go towards improving local roads, which Chancellor Sajid Javid described as the “arteries of our country”.
Healthcare - £26.25bn: The Conservatives have promised 50 million more doctors’ appointments and to employ 50,000 more nurses; this pledge involves retraining 18,500 nurses. The new NHS ‘day-to-day’ budget is said to be the biggest rise since the last Labour government.
Education - £4.61bn: Plans for the education sector include overhauling Ofsted and increasing per-pupil funding for primary and secondary schools. Sixth forms and colleges will receive £400 million of the overall budget.
These numbers were different to Labour’s more radical pledges, as their proposed spends were far greater. Most of Labour’s promises were several times higher than those of Conservatives.
The Financial News’ website includes an account from over 20 finance professionals – mostly with the view that the finance industry, and businesses in general, will prosper under the Conservatives.
Tax change pledges
A report collated by the Chartered Institute of Taxation presents the Conservative manifesto pledges relating to taxes - the full list also compares pledges from other parties. Many of these affect finance professionals directly:
- Safeguarding customers and suppliers against firms going into administration, with strengthened corporate governance and audit regime, and an insolvency rule reform.
- Introducing legislation to protect pensions being misused by irresponsible employers.
- Corporation tax being maintained at 19%, as opposed to Labour’s pledge to raise it by 7%.
- Ensuring that the UK can attract the entrepreneurs of the future with a new start-up visa.
- Further measures to avoid profit-shifting by multinational companies to avoid paying taxes.
- Raising the National Insurance threshold to £9,500 in 2020/2021, aiming to reach £12,500 eventually.
- Increasing research and development tax credits to 13%.
- Introducing a plastic tax so that companies can take responsibility for their use of plastic and reduce waste.
These proposed changes are likely to come into effect after the reveal of the next government budget by the Chancellor of the Exchequer, Sajid Javid, predicted to be taking place in February 2020.
Finance professionals, along with many others, will hope that the uncertainty of the past three years will now be replaced by a period of stability. However, whether that actually comes to pass remains to be seen.
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